Stamp Duty Land Tax: Changes for First-Time Buyers from 2025

The landscape of residential property purchases in England is set to shift significantly for first-time buyers after 31 March 2025, as the Stamp Duty Land Tax (SDLT) thresholds will change. These alterations will have a substantial impact on the affordability of homes for those taking their first step onto the property ladder.

Current SDLT Thresholds

At present, first-time buyers enjoy a generous SDLT relief. They pay no SDLT on properties valued up to ￡425,000, and benefit from a reduced rate on homes priced between ￡425,001 and ￡625,000.

This relief has been instrumental in helping many young adults and families purchase their first homes, particularly in areas with higher property values, such as London and the South East.

The 2025 SDLT Changes

From 1 April 2025, the SDLT rates will change dramatically for first-time buyers:

• The nil-rate threshold will decrease from ￡425,000 to ￡300,000
• The maximum property value eligible for first-time buyer relief will drop from ￡625,000 to ￡500,000.

These changes mean that first-time buyers will start paying SDLT on properties valued over ￡300,000, a significant reduction from the current ￡425,000 threshold.

Impact on First-Time Buyers

The impact of these changes will be felt most acutely by those purchasing properties in the ￡300,000 to ￡425,000 range. For instance:

• A first-time buyer purchasing a home for ￡425,000 in 2025 will face an SDLT bill of ￡6,250, compared with paying no SDLT under the current rules
• Those buying properties valued between ￡300,001 and ￡500,000 will pay 5% SDLT on the portion above ￡300,000

In regions with higher average house prices, such as London and the South East, where the average property prices currently stand at ￡536,300 and ￡480,108 respectively, first-time buyers will be particularly affected.

Wider Market Implications

The reduction in SDLT thresholds is likely to have broader implications for the housing market:

• It may slow down the property market, especially in the price brackets most affected by the changes.
• It will skew the market for two price levels: around ￡300,000 and ￡500,000
• Some potential buyers might delay their purchases to save the additional funds needed for SDLT.
• The changes could counteract efforts to increase homeownership, particularly among younger generations.

Planning Ahead

For those considering their first property purchase, it's crucial to factor these impending changes into their financial planning. Prospective buyers aiming to benefit from the current, more favourable SDLT rates should aim to complete their purchases before 31 March 2025.

Given that the average time to complete a house purchase is 12 to 16 weeks, it would be prudent for first-time buyers to initiate the conveyancing process by the end of 2024 at the latest.

Conclusion

The upcoming changes to SDLT thresholds represent a significant shift in the financial landscape for first-time buyers. While the government's aim may be to normalise the property market post-pandemic, these changes will undoubtedly make the path to homeownership more challenging for many. As legal professionals, it's our role to guide clients through these changes, ensuring they make informed decisions in light of the evolving SDLT regulations. If you would like to discuss these changes please get in contact with CDS Mayfair today.

Legal Consultant | Contact CDS Mayfair Law Firm